While the administration of President Joe Biden is struggling to define exactly what a recession is, there are growing signs that the U.S. is heading for one.
The U.S. economy, the world’s largest, shrank for a second straight quarter in the three months to June, data from the U.S. Commerce Department is expected to confirm later this week, but the debate over whether it has slipped into recession is likely to end. After a long time.
As Wall Street awaits earnings from big tech companies like Alphabet (GOOGL) – Get the Alphabet Inc. reportYuan (META) – Get Meta Platforms Inc. Reportsapple (AAPL) – Get Apple Inc. ReportAmazon (AMZN) – Get Amazon.com Inc. Reportand Microsoft (MSFT) – Get Microsoft Corporation Reports Investors should get a sense of Silicon Valley’s view of the economy this week with forecasts.
Last week, Bloomberg reported that Apple plans to slow hiring and spending in some divisions next year. Meta told The Washington Post that it will “make changes to some parts of its business” due to the larger economic environment.
Last month, Tesla (TSLA) – Get Tesla Inc report Closing its San Mateo office and laying off 200 employees to cut costs. The cuts come days after CEO Elon Musk said he had “super bad” feelings about the economy.
Online retailer Shopify now (SHOP) – Get Shopify Inc. Class A Subsidiary Report Plans to cut costs through layoffs have been announced.
On Tuesday, The Wall Street Journal reported that Shopify plans to cut 10% of its workforce in a “comprehensive restructuring.”
The company, which confirmed the report in a press release sent to its “team” late Tuesday morning, said it said “the number of teammates involved will be less than the number of teammates we have acquired in the process.”
Shopify plans to cut about 10% of its workforce by the end of the day, with the bulk of the layoffs coming from recruiting, support and sales.
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The company said it will also eliminate “over-specialized and duplicated roles” and others that the company called “convenient but too far from building a product.”
As more customers return to brick-and-mortar stores, Shopify blames a shift in attitudes toward online retail in the post-pandemic world.
The company had predicted that the mix of channels between e-retail and brick-and-mortar stores would be a “permanent leap of five or even 10 years.” That bet has led to an increase in hiring activity, which Shopify says is now correcting.
“It’s clear now that the bets haven’t paid off. What we’re seeing now is a return of the mix to roughly what the pre-Covid data would suggest. Still growing steadily, but it’s not a meaningful 5-year leap,” the CEO said. Officer Tobias Lutke said.
According to Macrotrends, Shopify had about 10,000 employees at the end of 2021, a year-over-year increase of nearly 43% from 2020.
Signs of Economic Pain
Walmart stock (WMT) – Get the Walmart Company ReportThe world’s largest brick-and-mortar retailer fell sharply on Tuesday as the company cut its second-quarter and full-year profit forecast as inventory levels were higher than expected and persistent inflationary pressures dented profit margins.
Walmart said operating income could fall 13% to 14% in the fiscal second quarter ended in July and 11% to 14% for the full year. Adjusted earnings are expected to decline 8% to 9% in the second quarter and 11% to 13% for the full year, a sharp decline from the May forecast of a fall of just 1%.
Walmart’s overall inventory increased by 33% last quarter, and the company said in early May that it would keep prices “as low as possible” in order to move inventory in the coming months.
“Rising levels of food and fuel inflation are impacting the way customers spend, and while we’re making good progress in clearing tough categories, Walmart U.S. apparel needs more markdown dollars,” said CEO Doug McMillon. “We now expect more pressure on general merchandise in the second half; however, we are encouraged by the beginnings of Walmart’s U.S. school supplies”